rates

Frankfurt has tightened again.

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The European Central Bank’s governing council lifted the deposit facility rate from 2.25% to 2.5% on Thursday. It is the second hike since 11 June, when the ECB moved for the first time in three years.

The ECB sets monetary policy for the eurozone through three key interest rates, with the deposit facility rate serving as its main policy benchmark.

The main refinancing rate was lifted to 2.65% and the marginal lending facility to 2.9%.

In its statement, the central bank noted that “the conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period,” while ensuring that “with today’s decision, the Governing Council remains well positioned to navigate the uncertainty caused by the conflict.”

The ECB staff projections continue to estimate that headline inflation will average 3% this year. However, it has revised up the expectations for 2027 and 2028 to 2.5% and 2.1% respectively, compared with June.

An energy problem, not a demand problem

The decision follows an August inflation reading of 3.3%, up from 2.9% in July and the highest since September 2023.

Energy costs did nearly all the work, with energy inflation jumping to 14.3% from 10.3%, as fighting around the Strait of Hormuz kept crude supply constrained. The problem persists as Brent crude crossed $100 a barrel again on Wednesday due to renewed exchanges of fire between the US and Iran.

Underneath, the picture is calmer.

Core inflation, which strips out energy, food, alcohol and tobacco, actually fell to 2.4% from 2.5% in August, while services inflation, the component most sensitive to wages, dropped to 3% from 3.3%. There is still little sign that expensive energy is spreading into the rest of the economy.

That distinction has been central to the ECB’s own thinking.

In a paper published earlier this month, its economists found that adverse energy supply factors accounted for around 90% of the rise in energy inflation between January and May of this year.

“This time the energy supply shock dominates, while demand and public policy stimulus have minor roles,” the economists wrote, contrasting it with the 2021-22 surge that prompted a far more aggressive response.

A single rate for very different economies

The eurozone inflation average conceals a wide spread.

August inflation ran at 4.5% in Spain, 2.9% in Germany and 2.7% in France, three economies facing the same energy shock with markedly different outcomes.

Growth complicates matters further.

The bloc has held up better than expected, but resilience is not overheating, and even at 2.5% the deposit rate remains within the range the ECB considers neutral. Going further would mean deciding that policy must actively restrain the economy.

Christine Lagarde had signalled this move in July, when the council held rates but instructed staff to model oil and gas scenarios ahead of September.

“The burden of proof is on data,” Lagarde said then, adding that “the full inflationary impact of the energy shock has yet to play out.”

Thursday’s decision comes alongside fresh staff projections, though their cut-off date falls roughly two weeks before the meeting, meaning neither the latest leg higher in oil nor the surge in European government bond yields to 15-year highs will be reflected.

Attention now turns to Frankfurt’s peers.

The Federal Reserve will announce on 16 September and the Bank of Japan on the 18, with both expected to consider hikes of their own.

Meanwhile, the Bank of England will decide on 17 September and is expected to hold rates as it currently maintains a much higher benchmark than the rest at 3.75%.

Young Brits are swapping traditional beach-day pastimes for paddleboards, surfing and a dip in the sea – but they still love one thing

Gen Z is redefining the great British day at the seaside, replacing traditional favourites like arcade games and crazy golf with paddleboarding and surfing. A poll of 2,000 adults found 11% of Gen Z consider paddleboarding to be essential to the perfect day by the sea, compared to just 7% of Millennials and 3% of Boomers. They were also far more likely to take a dip, with 38% saying swimming in the sea is a beach day priority.

Classic seaside pastimes appear to be losing their appeal among younger adults as 74% would skip arcade games, and 87% would happily avoid a round of crazy golf.

But seaside traditions such as tucking into fish and chips, a picnic and coastal walks were still among the most treasured experiences across all those surveyed.

Bryony Walker from Walker’s Shortbread, which brought its newly launched Wee Chunkies bites to a seaside pop-up on Brighton beach, said: “While the research shows beachgoers still crave the classic seaside experiences, it’s interesting to see what now makes up the ideal day at the beach.

“Activities like paddleboarding are becoming more popular with younger generations, but what remains constant is a dip in the sea.

“The coast holds special appeal, combining nostalgia, quality family time and the simple joys of a well-packed picnic, fresh air and time outdoors.”

The study, conducted through OnePoll, revealed that 15 minutes is considered the perfect amount of time to spend in the water.

Following the dip, beachgoers enjoy wrapping themselves in a toasty towel (49%) or tucking into a warm sweet snack to restore energy levels (18%) – a tradition the Scots refer to as a ‘Shivery Bite’ – something only 9% of Brits are familiar with.

Due to the unfamiliarity with this Scottish phrase, Walker’s Shortbread decided to introduce the Shivery Bite concept to Bank Holiday beachgoers and swimmers along Brighton’s bustling seafront.

Bryony Walker added: “The insights have revealed the nation’s ideal beach day, with fresh sea air, sunshine, blue skies and that essential paddle in the water. “After a summer of intense heat, beachgoers are craving a moment of relief, whether it’s a colder coastal breeze or cosy comfort food.

“Few things beat wrapping up after a swim or enjoying a warm treat, something in Scotland we call a ‘Shivery Bite’, and our new shortbread offering is exactly for this moment, best served warm, to help make the most of the post-dip feeling.”

THE NATIONS PERFECT BEACH DAY:

1. Warm sunshine
2. Having ice cream
3. Coastal walks
4. Having fish and chips
5. Blue skies
6. Walking barefoot in sand
7. Having a paddle in the sea
8. Calm sea
9. Having a picnic
10. Take family photos
11. Visiting a pier
12. Sunbathing
13. Swimming in the sea
14. Beach snacks
15. Building sandcastles
16. Reading
17. Arcade games
18. Sharing snacks
19. Rock pooling
20. Seaside souvenirs
21. Skimming stones
22. Collecting rocks
23. Play crazy golf
24. Taking naps
25. Hot foods to warm you up after swimming.